Bottom violated state law, misled council about money, suit alleges

By Tim Farley, News Editor – Former Yukon City Manager Grayson Bottom failed to comply with state mandated competitive bidding requirements and misled Yukon City Council members about the municipality’s true financial position, according to a counterclaim filed in federal court.

The lawsuit was filed by Yukon city officials against Bottom, who previously filed an earlier lawsuit against the city for firing him and its failure to provide him severance pay.
City Manager Jim Crosby declined to comment on the lawsuit, which was filed Nov 27.

Bottom referred questions about the counterclaim to attorney Joe White, who could not be reached for comment. Todd Court, the city’s attorney in this case, could not be reached for comment.

Bottom resigned as city manager effective Dec. 31, 2015, amid a storm of accusations that he mismanaged the city’s funds. The council voted to indefinitely table Bottom’s contract renewal.

A forensic audit conducted by Crawford & Associates uncovered several internal deficiencies including violation of the state’s competitive bidding requirements. According to the audit and the counterclaim, Bottom participated in a practice known as bid-splitting by purchasing poly-carts from a Canadian company, IPL, Inc.

Bottom “directed or authorized several purchases” by the city and the Yukon Municipal Authority in excess of $25,000 without utilizing the required competitive bidding procedure.

The lawsuit claims Bottom did not bid or purchase the poly-carts through the state bid sheet.

The lawsuit alleges Bottom also did not disclose to the city council fund deficits in several city accounts. The forensic audit uncovered evidence that the city’s overall cash and investment balances declined $9.5 million from 2012 to 2015 as a result of spending more cash than received during that time period. Bottom was the city manager during that time.
In addition, the lawsuit claims Bottom prepared a fiscal year 2016 budget that, if realized, would have resulted in an additional decline of $3.6 million.

The lawsuit also alleges Bottom instructed city employees to inappropriately use restricted funds. In one example mentioned in the lawsuit, $1.3 million of restricted construction money held by a trustee bank was used to pay city operating expenses instead of paying the Corps of Engineers for a water tower project.

In another instance, $1.3 million of restricted sales tax money was improperly appropriated as unrestricted revenue in the general fund budget rather than used to meet the city’s required reserve amount.

“Bottom’s conduct was intentional and malicious, or at a minimum in reckless disregard of the rights of the city and the YMA,” the lawsuit claims.

As a result of Bottom’s actions, the city’s bond ratings declined, assets were depleted and city officials were forced to make emergency cuts on planned expenditures. In addition, employees were laid off, utility rates were raised and the was forced to implement other “drastic recovery efforts,” the counterclaim alleges.

The lawsuit alleges Bottom violated the Municipal Budget Act by not disclosing to the city council that expenditures exceeded available fund balances. In one case, Bottom ordered a transfer of $1.2 million of restricted sales tax revenue from the general reserve account to the city’s pooled bank account without specific city council approval and legal authority.
Bottom is accused in the lawsuit of failing to prepare a legally required budget for the Capital Improvement Fund, Public Employees Sales Tax Fund and the General Reserve Fund.

“Due to Bottom’s illegal acts, he was statutorily prohibited from being employed by the city and is required to disgorge all salary and benefits received by the city after violating the OMBA.

Yukon city officials claim Bottom breached his fiduciary duty by failing to properly supervise the city’s finances and finance department.

“Bottom represented that the city and the YMA were in excellent financial condition when in fact the city and the YMA were facing serious financial difficulties. Bottom disguised and misled the city council regarding the true financial picture of the city and the YMA by repeatedly dipping into the various funds and reserve monies in order to hide revenue shortfalls and expenditure overruns.

The city’s counterclaim alleges Bottom intentionally concealed the truth about Yukon’s financial picture so he could induce the council to authorize grants, new bond issues and the adoption of a fiscally “irresponsible and illegal budget.”

The city is seeking actual and punitive damages and legal fees with its counterclaim.